How to set a deployed printer as default using group-policy

You haven't mentioned adding pushprinterconnections.exe to run in your Printer GPOs. You will need this to push printers to XP machines. You can get the file from Windows 2003 R2 Admin Tools by downloading pmcmgmt.exe and extracting it on an XP machine. Add this file to the GPOs in the Computer Configuration> Windows Settings> Srcripts(Startup/Shutdown).

That's because there are two GPO-based ways to deploy a printer. You found one of them. The other:

User Configuration -> Windows Settings -> Deployed Printers (You need Print Services component installed to see this.)

It's that location where the Print Management MMC puts the deployed printers. Both methods will send a printer to a client, though they use slightly different methods for actually making that happen.

WHY did Microsoft allow two deployment methods? That I can't tell you, though it's probably based on the fact that the entire "Preferences" part of a GPO was an add-on that used to be supplied by a separate company before Microsoft bought them out and it's still with us for legacy reasons.

One difference between the two, though. With the Preferences method, you can set a printer as the Default Printer for a user. You can't do that with the Windows Settings method.